Post-zero-Covid: What the return of Chinese tourists means for the global economy

Hong Kong

In the pre-Covid years, China was the world’s largest source of international travelers. Its 155 million tourists spent more than a quarter of a trillion dollars beyond its borders in 2019.

That generosity fell precipitously over the past three years as the country essentially closed its borders. But as China prepares to reopen on Sunday, millions of tourists are poised to return to the world stage, raising hopes of a rebound for the global hotel industry.

While international travel may not immediately return to pre-pandemic levels, companies, industries and countries that rely on Chinese tourists will get a boost in 2023, analysts say.

China averaged about 12 million outbound air passengers a month in 2019, but those numbers fell 95% during the Covid years, according to Steve Saxon, a partner in McKinsey’s Shenzhen office. He predicts that number will rebound to about 6 million a month by summer, fueled by the pent-up wanderlust of wealthy young Chinese like Emmy Lu, who works for an advertising firm in Beijing.

“I am very happy [about the reopening]! Lu told CNN. “Because of the pandemic, I have only been able to walk around the country for the last few years. It was difficult.”

“It’s just that I’ve been stuck inside the country for a little too long. I’m really looking forward to the lifting of restrictions, so I can go somewhere to have fun! The 30-year-old said, adding that she most wanted to visit Japan and Europe.

A traveler at Beijing Capital International Airport on Friday, Dec.  30, 2022.

As China announced last month, it will no longer quarantine travelers arriving on Jan. 8, including residents returning from overseas trips. searches for international flights and accommodations immediately hit a three-year high on ( TCOM ).

Bookings for overseas travel during the upcoming Lunar New Year holiday, which falls between January 21 and January 27 this year, have soared 540% from a year ago, according to data from Chinese travel site. Average spend per booking increased by 32%.

The main destinations are in the Asia Pacific region, including Australia, Thailand, Japan and Hong Kong. The United States and the United Kingdom are also in the top 10.

“The rapid build-up in… [bank] Deposits over the past year suggest that households in China have built up significant cash reserves,” said Alex Loo, a macro strategist at TD Securities, adding that frequent lockdowns have likely led to restrictions on household spending. .

There could be “revenge spending” by Chinese consumers, mirroring what happened in many developed markets when they reopened early last year, he said.

This is good news for many economies battered by the pandemic.

“We estimate that Hong Kong, Thailand, Vietnam and Singapore will benefit the most if China’s travel services imports return to 2019 levels,” Goldman Sachs analysts said.

Hong Kong, the world’s most visited city with just under 56 million arrivals in 2019, most from mainland China, could see an estimated 7.6% increase in its GDP as exports and tourism receipts increase, they said. Thailand’s GDP could increase by 2.9%, while Singapore would get a 1.2% increase.

Elsewhere in the world, Cambodia, Mauritius, Malaysia, Taiwan, Myanmar, Sri Lanka, South Korea and the Philippines are also likely to benefit from the return of Chinese tourists, according to research by Capital Economics.

Hong Kong has been particularly hard hit by the closure of its border with mainland China. The city’s mainstay industries of tourism and real estate have been badly affected. The financial center expects GDP to have contracted by 3.2% in 2022.

The city’s government announced Thursday that up to 60,000 people could cross the border daily. in each direction, from Sunday.

Several more Southeast Asian countries that rely on tourism have kept entry rules relatively relaxed for Chinese tourists, despite the record-breaking outbreak of Covid-19 that has swept through China in recent weeks. They include Thailand, Indonesia, Singapore and the Philippines.

“This is one of the opportunities we can accelerate economic recovery,” Thailand’s health minister said this week.

New Zealand has also waived testing requirements for Chinese visitors, who were the country’s second largest source of tourism revenue before the pandemic.

But other governments are more cautious. So far, nearly a dozen countries, including the United States, Germany, France, Canada, Japan, Australia and South Korea, have mandated testing.

On Wednesday, the European Union “strongly encouraged” its member states to require a negative Covid test for visitors to China before arrival.

There is clearly a “conflict” between tourism authorities and political and health officials in some countries, said Saxon, who heads McKinsey’s travel practice in Asia.

Airlines and airports have already rejected EU recommendations for testing requirements.

The International Air Transport Association, the airline industry’s global lobby group, along with airports represented by ACI Europe and Airlines for Europe, issued a joint statement on Thursday, calling the EU’s move “regrettable” and ” a knee-jerk reaction.”

But they welcomed the additional recommendation to test sewage as a way of identifying new variants of the disease, saying it should be an alternative to testing passengers.

In addition to the restrictions, international travel will take time to fully recover because many Chinese need to renew their passports and reapply for visas, analysts said.

Lu, from Beijing, said he was still considering his travel plans, given the different testing requirements and the high price of the flight.

“Restrictions are normal, because everyone wants to protect people in their own country,” he said. “I will wait to see if some policies will be relaxed.”

Liu Chaonan, a 24-year-old from Shenzhen, said she initially wanted to go to the Philippines to celebrate Chinese New Year, but did not have time to apply for a visa. So he switched to Thailand, which offers quick and easy e-permits.

“Time is short and I have to leave in about 10 days. People can choose some places and countries to travel to with visas,” she said, adding that she plans to learn scuba diving and wants to buy cosmetics. His total budget for the trip could exceed 10,000 yuan ($1,460).

Saxon said he expected international outbound travel from China to fully recover by the end of the year.

“In general, individuals are pragmatic and countries will welcome Chinese tourists because of their purchasing power,” he said, adding that countries can quickly remove restrictions when the Covid situation improves in China.

“International tourism will take time to kick in, but it will come back in a hurry, when it happens.”

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